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Microeconomics - Coggle Diagram

- - - - Types of Cost
        
        Accounting Cost
        a.k.a explicit cost
        
        Main idea
        
        Direct and monetary cost
        
        Noted down by accountants
        
        Example
        
        Cost of goods sold
        
        Operating expenses
        
        Taxes
        
        Economic Cost
        a.k.a implicit cost
        
        Example
        
        Opportunity cost of doing business.
        
        Capital as an opportunity cost.
        
        Main idea
        
        Opportunity cost
        
        Not noted down by accountants
        
        Indirect cost, used by owners usually
      - Capital as an Opportunity Cost
        
        Main idea
        
        Investing capital has opportunity costs
        
        "Money could be better if put elsewhere"
        
        Relevancy to you
        
        Consideration when starting business
        
        Consideration when expanding business
      - Types of Profit
        
        Economic Profit
        
        Main idea
        
        Total profit = total revenue - (explicit + implicit costs)
        
        A deeper look into profit
        
        Involves opportunity cost of owners
        
        Not noted by accountants
        
        Example
        
        profitability of catfish farm vs. investing on stock market
        
        profitability of going full-time business owner + staying on current company
        
        Relevancy to you
        
        Decision making
        
        Assessing company performance
        compare it with opportunity costs
        
        Accounting Profit
        
        Main idea
        
        The usual net income in accounting
        
        Only uses accounting cost
        
        Total profit = total revenue - total explicit cost
        
        Example
        
        How accountant note down
        your catfish business profits.
    - - Production Function
        
        Main Idea
        
        Rational people think marginally, and
        Production tends to have diminishing return to the input given
        
        This affects rational decision making
        
        Increase in input does not always mean increase in production
        
        Relevancy
        
        Decision making
        
        Analyzing firms decision making
        
        Example
        Catfish Business
        
        Why Diminishing
        
        Diseconomies of Scale
      - Total-Cost Curve
        
        Main Idea
        
        Rational people think marginally
        As quantity production increases, cost usually doubles
        
        Due to diminishing return on the production-side
        
        Relevancy
        
        More insight complements production function
        
        Example
        the same catfish business above
        
        Why Increasing
        
        Diseconomies of Scale
- - - - Competitive Market
        No monopoly, price are determined by the market itself.
      - Non-Competitive Market
        Monopoly exists, and they dictate the market.
    - - Supply
        
        Supply Curve
        
        Higher price = higher seller's willingness to sell, higher production, higher quantity
        
        Factors of Shifting
        
        Amount of Sellers
        
        Input Cost
        
        Technology & Operations Efficiency
        
        Expectations
      - Demand
        
        Factors of Shifting
        
        Income
        
        Positive: Normal Goods
        
        Negative: Inferior Goods
        e.g: Bus Ticket, Low-End Foods
        
        Taste
        
        Other Products
        
        Negative correlation: substitutes
        
        Positive correlation: complements
        
        Amount of Buyers
        
        Expectations
        
        Demand Curve
        
        Higher price = fewer buyer's willingness to buy, lower quantity
      - Supply & Demand Together
        
        Equilibrium
        
        Equilibrium Price
        
        Equilibrium Quantity
        
        Surplus
        
        Seller would sell at lower price,
        this will in the end causes the price to move along the curve to equilibrium
        
        The price is higher than what buyer are willing to buy,
        causing higher quantity of production by seller that no one can buy.
        
        Shortage
        
        Buyer would buy at higher price,
        this will in the end, causes the price to move along the curve to equilibrium
        
        The price is lower than what seller are willing to sell,
        causing unattractive market for sellers, which they will reduce production or even stop.
        
        Core Concept
        
        At equilibrium, buyer get what they want, seller get what they want
        
        Changes in Equilibrium
        
        Steps in Analyzing
        
        1) Demand, Supply, or Both shifts?
        
        2) At which direction it shifts?
        
        3) Analyzing the new equilibrium
        
        Total Revenue
        Price x Quantity, to determine if newer equilibrium is more profitable or not for demand-side or supply-side.
        
        What does it mean?
        
        Equilibrium changes as shift occurs.
        
        Market always strive to go to the equilibrium.
        
        Example
        
        A hurricane devastates the sugar production company
        that affects ice cream supply.
        
        A very hot weather causing people to really want ice cream.
        
        A sugar production company gets closed down in a very hot weather.
        
        A sugar production company gets expanded in a cold weather.
  - - - Core Idea
        How sensitive the supply / demand curve change
        when price / other factors change.
      - Elastic
        When it is sensitive
      - Inelastic
        When it is insensitive.
      - Movement Types
        
        Positive
        Moving with the influencing factor
        
        Common Goods to Income
        
        Luxury Goods to Income
        (Hyper-Positive), very sensitive
        
        Goods to Material Price
        
        Negative
        Moving against the influencing factor.
        
        Inferior Goods to Income
        
        Backward-bending supply-curve of labour.
      - Demand-Side
        
        Determinants
        
        Towards Elastic
        
        Abundant substitute goods.
        
        Luxuries (over necessities)
        
        Cuts high portion of person's income.
        
        Towards Inelastic
        
        Necessities (over luxuries)
        
        Lack of substitute goods.
        
        Cuts low portion of person's income.
      - Supply-Side
- - - - Side effect is positive to bystanders.
      - E.g a beach club booms an area's economy.
    - - Side effect is negative to bystanders.
      - E.g a beach club increases crime rate on an are.
      - E.g TPA on Denpasar Border, smells.
  - - - Important for public relations.
      - Positive relation correlates with higher sales.
      - People like supporting positive businesses, causing long-term success.
    - - Government tend to stop externalities by tax.
      - Less negative externalities, less disturbance.
- - - - Production Possibilities Curve
        
        On the Line
        
        Efficient.
        
        Using resources well.
        
        Inside the Curve
        
        Inefficient.
        
        Not using resources well.
        
        Outside the Curve
        
        Unfeasible
        
        Unrealistic
        
        Can only be gained through trade
        Very good if possible
        
        Specialization: Comparative Advantage
        
        Specialization
        Allows entities to focus on their goods they are good at,
        and trade on the goods they are not good at.
        
        Determining Comparative Advantage
        
        Count the Opportunity Costs of each decision to each person
        
        A person should do something that has lower opportunity cost of the other option compared to the other person. Also vice versa for the other person.
        
        It is not possible to have one person an absolute advantage on comparative advantage
        
        2 more items...
        
        To determine the trade, it must trade at a lower opportunity cost of the party that does not produce it, and higher than the opportunity cost of not producing the good for the seller party to have a win-win solution.
        
        1 more item...
        
        Absolute Advantage
        
        Someone could be better at everything
        because they are efficient
        
        But they tend to not be better at everything at the same time, they have to make trade-offs with their inputs
        
        E.g
        Audi in 1 hour can do 20 softwares or 15 marketing
        Maha in 1 hour can do 5 softwares or 10 marketing
        Audi is better-off do all-in software engineering and Maha goes all-in marketing, because of the trade-offs
        
        Moving along the curve
        
        Making trade-offs of producing other product
        at the expense of the another product.
        
        Why it's a Curve?
        Why not a straight line?
        
        Specialization of tools
        
        Specialization of labour
        
        Reputation and other aspects